RBI Holds Repo Rate Steady; Cuts Reverse Repo Rates

The Reserve Bank of India (RBI) today left repo rates unchanged, as was largely expected, but, increased the reverse repo rate to 6 per cent from 5.75 per cent. While the repo rate is the rate at which the RBI lends money to banks, the reverse repo is the opposite, where banks lend money to the RBI. Stock markets, which were largely expecting a status quo in line with what was announced saw very little fluctuations.

It was largely expected that the repo rate would be kept unchanged. The Monetary Policy Committee which met here today, unanimously kept the rates unchanged.

"Risks are evenly balanced around the inflation trajectory at the current juncture. There are upside risks to the baseline projection. The main one stems from the uncertainty surrounding the outcome of the south west monsoon in view of the rising probability of an El Niño event around July-August, and its implications for food inflation," the RBI said in a statement.

"The decision of the MPC is consistent with a neutral stance of monetary policy in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4 per cent within a band of +/- 2 per cent, while supporting growth," the release further added.

The present decision by the RBI may not alter lending and borrowing rates and hence loans and deposit rates would hold steady.

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